This file was created by scanning the printed publication. Text errors identified 

by the software have been corrected; however, some errors may remain.

Knapp, Gunnar. 1992. Native timber harvests in southeast Alaska. Gen. Tech. Rep.

PNW-GTR-284. Portland, OR: U.S. Department of Agriculture. Forest Service,

Pacific Northwest Research Station. 48 p.

The Alaska Native Claims Settlement Act established 13 Native corporations in

southeast Alaska. There are 12 "village" corporations and 1 "regional" corporation

(Sealaska Corporation). The Native corporations were entitled to select about

540,000 acres of land out of the Tongass National Forest; about 95 percent have

been conveyed. This study reviews Native corporation timber resources, harvests

to date, and projected future harvest levels.

Publicly available data on the volume of timber conveyed to Native corporations are

subject to a wide margin of error. Estimates based on USDA Forest Service data

suggest that economic volume at conveyance was between 4.0 and 7.8 billion board

feet. About 56 percent of this timber volume was on village corporation lands, with

the remainder on Sealaska lands.

Native corporation timber harvests began in 1979 and grew rapidly to about 400 million board feet in 1987 and 1988, despite depressed timber markets from 1981 to

1986. Timber harvests in 1989 were about 600 million board feet. Since 1983, more

than half the timber harvests in southeast Alaska have occurred on Native lands.

More than 3 billion board feet were harvested by 1989. Most of the timber is exported as round logs, primarily to Japan.

Most of the village corporations will have harvested all their merchantable timber

by 1991. If current market conditions continue, Native harvests will decline sharply

between 1989 and 1992 as most village corporation harvests end. About 10 to 15

years from now, harvests will again decline after Sealaska Corporation completes

logging on most of its lands.

Keywords: Alaska (southeast), Native corporations, timber harvests, timber inventory.

Abstract
1 Introduction

3 Southeast Alaska Native Corporations

3 The Alaska Native Claims Settlement Act

5 Southeast Alaska Native Corporations

10 Timber Inventories on Native Lands

10 Forest Service Inventory Estimates

18 Other Inventory Estimates

19 Summary of Inventory at Conveyance

19 Native Corporation Timber Harvests to Date

19 Timber Harvests

23 Markets for Native Timber

26 Harvest Costs

28 Other Removals From Timber Inventory

29 Total Removals From Timber Inventory

29 Factors Affecting Native Corporation Harvests

29 Village Corporation Harvests

35 Sealaska Corporation Harvests

36 Future Native Timber Harvests

37 Remaining Timber Inventory on Native Lands

37 Projections of Timber Harvests From Native Lands

43 Summary of Native Timber Harvest Projections

43 Literature Cited

Contents
Introduction The 1971 Alaska Native Claims Settlement Act (ANCSA) established 13 Native

corporations in southeast Alaska that were entitled to select about 550,000 acres

of land from the Tongass National Forest. About 90 percent of these lands have

been conveyed to Native corporations, with most land conveyances occurring in

1979 and 1980. These lands had, in 1979, an estimated standing timber volume of

about 11 billion board feet, or about 10 percent of the timber volume available for

harvest in southeast Alaska.1

Most Native corporations began timber harvesting operations shortly after receiving

title to their lands. Native timber harvests grew rapidly to more than 613 million board

feet in FY 1989 (table 1, fig. 1). Since 1983, more than half the timber harvests in

southeast Alaska have occurred on Native lands. Many of the corporations have now

harvested most of their merchantable timber, and Native corporation harvests are

expected to decline significantly from the levels of recent years.

Native harvests are an important consideration in the projections of future demand

for Tongass National Forest timber. According to the USDA Forest Service, the

growth in Native timber harvests contributed to a decline in Tongass National Forest

timber harvests from 1982 to 1985; the Forest Service expects demand for Tongass

timber to increase, however, as Native harvests decline in the future (USDA Forest

Service 1988b: 5,11).

This study reviews Native corporation timber resources, harvests to date, and projected future harvest levels. It is based entirely on publicly available information.2

The major data sources included Forest Service forest inventory data collected

before conveyance of Native lands from the Tongass National Forest, Forest

Service estimates of annual timber harvests from Native lands, and Native Corporation annual reports.3

 In addition, I spoke with numerous Federal, State, and

private industry officials knowledgeable about the southeast Alaska forest industry.

Available data on Native corporation inventory and harvests are limited. No data are

publicly available on current timber inventories on Native lands. The only systematic

inventories of Native timber for the ownership as a whole occurred either before or

shortly after conveyance. These original inventory estimates are subject to wide

margins of error.

1

 Van Hees (1988: 6). Total estimated net volume for southeast Alaska in the mid-1970s was 149 billion board feet Of

this, 38 billion board feet was on lands are currently reserved

and not available for timber harvest (for example, wilderness).

Excluding these lands, net timber volume conveyed to Native

corporations was about 10 percent of the nonreserved timber

volume in southeast Alaska.

2

 Sealaska Corporation, the largest Native timber holder,

declined to provide information on timber inventory or

harvests for this study. This precluded a more straightforward analysis based on Native corporation records.

3

 Under Alaska law, corporations with more than 500 shareholders must file copies of annual reports with the Alaska

Department of Commerce, Division of Banking and Securities

These documents are available for review by the public. I

reviewed all annual reports on file with the division; however,

annual reports were not available for some of the smaller

village corporations

1
Table 1—Timber harvests in southeast Alaska by ownership, fiscal years

1980-89

Landowner

Fiscal

year

1980b

1981

1982

1983

1984

1985

1986

1987

1988

1989

Native

corporations3

145

89

157

304

290

286

355

411

408

613

Forest

Service

 ---------Millions

480

387

370

250

261

232

291

336

396

445

State of

Alaska

of board feet ---------

33

39

26

21

15

4

11

16

14

14

BIA

13

5

3

3

1

0

0

0

0

4

as percentage

Total

671

520

556

578

567

522

656

764

818

1074

of total

22

17

28

53

51

55

54

54

50

57

Total 3057 3448 192 28 6725 45

a

 Native harvests for fiscal years 1982-86 may include about 20-40 MMBF harvested in south-central

Alaska.

b

 Source. USDA Forest Service 1989 : 2

Source: USDA Forest Service 1990 : 10

Figure 1—Timber harvests

in southeast Alaska, fiscal

years 1980-89. (Sources.

USDA Forest Service

1989. 2;1990:10.)

2

Percent
Estimates of timber harvests from Native lands also are subject to wide margins of

error, and additionally, historical timber sale volumes may significantly understate

the volume of timber removed from economic inventory. Because of low timber prices

during much of the 1980s, a large but unknown volume of lower quality timber was

cut but not used. Some marginal timber that might have been harvested under more

favorable market conditions was left standing but was effectively removed from economic inventory because of high costs in returning to previously harvested areas for

relatively low volumes of remaining timber.

I used two different approaches to examine remaining inventory and potential future

harvests from Native lands. The first approach, which represents the bulk of the

study, was to determine reasonable ranges for inventory conveyances and past

harvests and was based on a review of available sources of data and their limitations. These ranges are then used to estimate a range for remaining timber

inventory on Native lands. The second, more direct approach, was to summarize

available information about remaining inventory and harvest plans for each of the

13 corporations. Future harvests projected with this second approach are consistent

with the lower end of the range estimated by the first approach.

Background—In 1971, the U.S. Government settled the aboriginal land claims of

Indians, Eskimos, and Aleuts in Alaska with passage of the Alaska Native Claims

Settlement Act (ANCSA). The Government had long acknowledged that the Native

peoples in Alaska had some rights to land in Alaska because they had lived on and

used that land for thousands of years and had never signed treaties relinquishing

their rights. But for many years there was no pressing need to define Native land

rights: Alaska was a huge place with few people, the Federal Government owned

virtually all the land, and Alaska Natives had much the same access to land that

they had always had.

In 1959, Alaska became a State, and the new State Government received rights to

select more than 100 million acres. Native groups decided that the time had come

to act on their claims. Within a few years, essentially all of Alaska was under Native

claim, and in 1967 the Secretary of the Interior halted land transfers to the State Government until the claims were settled. Soon after, in 1968, oil companies exploring

on the North Slope discovered what proved to be the largest known oil field in North

America: the 10-billion barrel Prudhoe Bay field. Development of that field and construction of a pipeline across Alaska were prevented by the unresolved Native land

claims.

Settlement terms—The freeze on State land transfers and the huge untapped oil

field put Alaska Natives in a strong bargaining position. On December 18,1971,

ANCSA became law and awarded Alaska Natives by far the biggest settlement ever

of aboriginal claims: $1 billion and 40 million acres. The act also gave Native villages

on existing land reserves the option of taking ownership of those lands. Several

villages did so. thereby bringing total land awarded Alaska Natives under the act to

about 44 million acres.

The Alaska Native Claims Settlement Act is a complicated law that has been

amended many times since 1971. Congressional and court battles over provisions

of the act are still going on. Below, I briefly describe the general terms of the act

and the provisions most relevant to this study.

3

Southeast Alaska

Native Corporations

The Alaska Native

Claims Settlement Act
Regional and village corporations—The claims settlement called for the establishment of Native regional and village corporations to manage the land and money

awards. These corporations—particularly the regional corporations—were to be profitmaking and thereby parlay the settlement land and money into a healthy economic

future for Alaska Natives. Thirteen regional corporations—12 in Alaska and 1 for

Natives living outside the State—and more than 200 village corporations were formed

under the act. All Natives alive on the day the act was signed into law were to share

in the settlement. Under terms of the act, eligible Natives were defined as those able

to prove that they were at least one-quarter Eskimo, Indian, or Aleut. Each eligible

Native was to receive his share of the settlement by enrolling in a regional and a

village corporation and becoming a stockholder. About 78,000 persons ultimately

enrolled under the act.

Cash award—The $1 billion cash award came partly from Federal money and partly

from State Government petroleum revenues. It was paid in installments, with the final

installment paid in 1981. The payments were split roughly in half between regional

and village corporations, with the payments to individual corporations based mostly

on population.

Land award—Transferring 40 million acres from Federal to Native ownership has

been a slow, complex, contentious process. At the end of 1987, Native corporations

had received title to about 88 percent of their lands.

When the act was passed, the U.S. Government identified specific Federal lands for

the Native corporations to choose from. These lands, known as "withdrawal lands"

because they were withdrawn from other uses, were mainly near Native villages; in

instances where there was not enough available land near a village, the Government

set aside "deficiency lands" elsewhere for Native selection. The corporations selected

land from the withdrawal and deficiency lands for several reasons, but mainly for

their subsistence and historic values and for their potential resource wealth.

The village corporations received surface rights to about 22 million acres. The

regional corporations received subsurface rights to the village lands. Each village

corporation received lands according to its population, with the smallest villages

(those with populations of less than 100) receiving about 69,000 acres each and

the largest (those with populations of more than 600) about 161.000 acres each.

Exceptions to this general rule were the corporations in southeast Alaska, which

received rights to 23,000 acres each, regardless of population.

Most of the remaining 16 million acres were divided among the regional corporations

under a complicated formula based mainly on land area within the region: the regions

largest in acreage got the most land, even if their populations were small. Six regional

corporations received land under this formula; the Doyon region in the interior and

the Arctic Slope region got the largest shares. Rights to regional corporation lands

include both surface and subsurface rights.

Taxation of ANCSA lands—Under section 21 (d) of ANCSA, timber and land received by Native corporations under ANCSA that is undeveloped is exempt from

State and local property taxes for 20 years after the date of enactment of ANCSA.

4
7(1) provision — Section 7(i) of ANCSA requires each regional corporation to distribute 70 percent of its net revenues from timber and mineral development among

the 12 Alaska-based regional corporations (including the distributing corporation).

This provision was included in the law on the grounds that some regions would be

richer in resources than others would. Application of the revenue-sharing provision

has been the subject of many disputes and several court battles. In 1982, a Settlement Agreement was adopted by the regional corporations that clarified procedures

for 7(i) distributions. Village corporations are not required to share their timber

revenues with other corporations.

22(k) provision s ---- Section 22(k) of ANCSA requires that for 5 years, any sale of

timber from lands selected under the act be "subject to the same restrictions relating

to the export of timber from the United States as are applicable to national forest

lands in Alaska." This section also required that for 12 years, these lands be "managed under the principle of sustained yield and under management practices for

protection and enhancement of environmental quality no less stringent than such

management practices on adjacent national forest lands.. . ."

In practice, the 22(k) provisions of ANCSA never were enforced. Responsibility for

interpreting or enforcing these provisions was not clearly assigned by ANCSA. The

Native corporations did not begin to receive conveyance to substantial areas of forest

land until 1979, 8 years after the passage of ANCSA, and large-scale timber harvests

did not begin until several years later. The corporations and most agencies with potential responsibility for enforcement interpreted the periods referred to in the 22(k)

provisions as dating from the passage of ANCSA.

1991 provisions—The act originally said that stock in Native corporations could not

be sold or seized for most kinds of debt until 20 years after the act was passed; after

1991, Native corporate stock was to become freely transferable. As 1991 drew closer,

Native leaders worried that when it became legal for shareholders to sell or lose their

stock the corporations could go under the control of non-Natives, and a result would

be loss of control by Natives of lands they had been awarded in settlement of their

aboriginal claims.

Native groups asked Congress to extend the ban on stock sales beyond 1991. At the

end of 1987. Congress passed legislation that extends the ban on transfer of stock

past 1991 but allows stockholders in each corporation the option of deciding whether

to make their stock freely transferable. Then-President Reagan signed this legislation

in February, 1988 (Alaska Native Claims Settlement Act Amendments of 1987).

The 1991 amendments also made several other significant changes to ANCSA. The

20-year exemption of undeveloped Native lands from State and local taxation was

made permanent rather than ending in 1991. If timber harvests occur, only the approximate area where timber is being harvested is subject to taxation. After commercial harvests end, timberland is no longer considered "developed" and is protected from taxation (Alaska Federation of Natives 1988).

Southeast Alaska Native Under ANCSA, Congress created one regional corporation for southeast Alaska,

Corporations Sealaska Corporation. Alaska Natives enrolled in Sealaska represent about 21

percent of total Alaska Native enrollment (Sealaska Corporation 1987: 27). The act

also created 10 village corporations and 2 urban corporations (for Juneau and Sitka)

in southeast Alaska. For simplicity, in this report, I have included the two urban

corporations under the term "village corporations."

5
Table 2 summarizes the names of the villages and corporations, the number of

shareholders, and the area of their land entitlement. The total ANCSA land entitlement of the Native corporations is about 544,000 acres, of which Sealaska Corporation is to receive about half.

Village corporation land selections—Figure 2 shows the areas of major land

selections by southeast Alaska Native corporations. Almost all the lands selected

by these corporations was in the Tongass National Forest. Land selections for

seven of the village corporations are near the villages, as provided for under

ANCSA;

4

 however, land selections for five of the village corporations (Goldbelt,

Shee-Atika, Kootznoowoo, Klukwan, and Cape Fox) are a considerable distance

from the communities. This is due in part to restrictions within ANCSA on where

selections could take place and the provision for alternative selection areas off of

Admiralty Island to resolve environmental disputes. In addition, a number of land

trades have taken place between the Forest Service and Native village corporations

after the original conveyances.

As shown in table 3, the village corporations have been conveyed almost all their

ANCSA land entitlements. Most of the conveyances took place between 1979 and

1981.

As a result of legislation passed after ANCSA, several village corporations are

entitled to exchange ANCSA lands for other lands within the Tongass National

Forest. The Admiralty Island National Monument Land Management Act of 1990

provided for exchanges of ANCSA lands held by Kootznoowoo for other lands on

a value for value basis. The Haida Land Exchange Act of 1986 provided for the

purchase of 5,400 acres of Haida lands by the Federal Government for $11 million;

an exchange of approximately 4,200 acres of Haida lands for other Federal lands;

and further exchanges, beginning in 1995, of remaining Haida ANCSA lands (including lands on which timber had been harvested) for other Federal lands on an

acre-for-acre basis. The Tongass Timber Reform Act of 1990 designated 5,600 acres

of high-volume Federal timber lands that may be selected in exchange for Haida

lands before November 1991. An additional provision of the Tongass Timber Reform

Act of 1990 requires a study of potential exchanges of Tongass National Forest lands

for previously harvested Native corporation lands.

Other legislation that would have provided additional timber lands to southeast

Alaska village corporations has been considered by Congress; for example, under

a provision proposed for the Tongass Timber Reform Act of 1990 but not included in

the final legislation, Goldbelt would have received additional timber lands near Hobart

Bay in return for recreational lands near Juneau. Exchanges of this type, under which

Native corporations would receive additional timber lands in return for land with recreational, wilderness, or other values but not necessarily acre for acre. are possible in

the future and could further increase timber supply from Native lands. 4

 Under Section 16(b) of ANCSA, each village corporation

was to select "an area equal to 23,040 acres, which must

include the township or townships in which all or part of the

Native village is located, plus, to the extent necessary, withdrawn lands from the townships that are contiguous to or

corner on such township All selections shall be contiguous

and in reasonably compact tracts, except as separated by

bodies of water, and shall conform as nearly as practicable to

the United States Lands Survey System "

6
Table 2—Southeast Alaska Native corporations

Type of

corporation

Village

or city

Corporation

name

Number of

shareholdersa

Land

entitlementb

Acres

Village

Village

Village

Village

Urban

Village

Village

Village

Village

Village

Urban

Village

Total, village

and urban

corporations

Regional

Angoon

Craig

Hoonah

Hydaburg

Juneau

Kake

Kasaan

Klawock

Klukwan

Sax man

Sitka

Yakutat

Kootznoowoo, Inc.

Shaan-Seet, Inc.

Huna Totem Corp.

Haida Corp.

Goldbelt, Inc.

Kake Tribal Corp.

Kavilco. Inc.

Klawock Heenya Corp.

Klukwan, Inc.

Cape Fox Corp.

Shee-Atika, Inc.

Yak-Tat-Kwaan, Inc.

8,963

Sealaska Corporation 15,388c

620

317

870

563

2,722

558

119

518

250

230

1,804

392

23,040

23,040

23.040

23.040

23,040

23,040

23,040

23,040

23,040

23,040

23,040

23,040

276,480

267,250

approx.

Total 15.388 543,730

approx.

a Source (except for Sealaska Corporation): Hoffman 1987. b

 Source: U.S. Department of Agriculture. Forest Service. 1990. Region 10 Native land selections statistics as of July 1,1990.16 p. Unpublished table. On file with: Institute of Social and Economic Research,

University of Alaska Anchorage, 3211 Providence Drive, Anchorage, Alaska 99508. Village corporation

entitlements include only those described in Sections 14 and 16 of ANCSA; additional entitlements provided for In subsequent legislation are not included. Sealaska entitlement is approximate: entitlement will

vary depending upon selection of 14(h)(1), 14(h)(2), 14(h)(3), and (14(h)(5) sites.

c

Source: Arnold 1978: xvi. Sealaska enrollments as of June 30. 1978. Village corporation shareholders are

also Sealaska shareholders.

Sealaska Corporation land selections—Under ANCSA, Sealaska Corporation was

entitled to select lands from eight withdrawal areas adjacent to Native villages (fig. 2).

As of July 1,1990, 238,240 acres had been conveyed to Sealaska. Most of these

lands were conveyed in 1979 and 1980.

7
8

Figure 2—Southeast Alaska

Native corporation lands and

villages.
Table 3—Land conveyances to southeast Alaska Native corporations as of July 1,1990

Area conveyed

Corporation

Cape Fox Corporation

Goldbelt, Inc.

Haida Corporation

Huna Totem Corporation

Kake Tribal Corporation

Kavilco, Inc.

Klawock Heenya Corporation

Klukwan. Inc.

Kootznoowoo, Inc.

Shaan-Seet, Inc.

Shee-Atika, Inc.

Yak-Tat-Kwaan, Inc.

ANCSA land

entitlement3

23.040

23,040

23,040

23,040

23,040

23,040

23,040

23.040

23,040

23.040

23,040

23,040

Before

1979

3.763

1

1979

6.954

27,767

20,770

20,587

21,711

23.040

20,857

3,190

20,103

1980

40

61

19,792

21,349

7,710

1981

7.065

2,969

40

960

23,073

1983-90

2,033

0

(2.224)

794

27

2.539

2,381

18.040

1.710

33

1,737

Total

19.815

30,736

20.850

19,384

22,505

23,067

22,331

23,730

25,750

22,567

26,296

21,841

Total

Sealaska Corporation

Total

276.480

267.250

approx.

543,730

approx.

3.764 164,979 48,952 34,066 27.111 278.872

159,481 35,745 2,600 40,414 238,240

3,764 324,460 84.697 36,666 67,525 517,112

Percent

Percentage of ANCSA

entitlement conveyed:

Village corporations

Sealaska Corporation

1

0

60

60

18

13

12

1

10

15

101

89

a

 Village corporation entitlements include only those described in Sections 14 and 16 of ANCSA, additional entitlements provided for in

subsequent legislation are not included. Sealaska entitlement is approximate: entitlement will vary depending upon selection of 14(h)(1), 14(h)(2), 14(h)(3), and (14(h)(5) sites.

Source U.S. Department of Agriculture, Forest Service 1990. Region 10 Native land selections statistics as of July 1, 1990. 16 p.

Unpublished table. On file with. Institute of Social and Economic Research, University of Alaska Anchorage, 3211 Providence Drive,

Anchorage, AK 99508

9
Estimates of Sealaska's total land entitlement range from as low as 267,000 acres

(a Forest Service estimate5

) to as high as 340,000 acres (a Sealaska Corporation

estimate [Sealaska Corporation 1987: 27]). This discrepancy results in part from

different expectations for eventual land entitlements under ANCSA, Section 14(h).

Under Section 14(h), 2 million acres were set aside for conveyance of lands for

cemetery sites, historical places, and Native allotments. Lands not conveyed for

these purposes are to be allocated to the regional corporations on the basis of

population. Depending on the size of Sealaska's Section 14(h) entitlement and

other factors, Sealaska is entitled to receive between 29,000 and 102,000 acres in

addition to lands received before July 1, 1990.

Annette Island Indian Reservation—The Annette Island Indian Reservation in southeast Alaska was established before and independently of ANCSA. The Bureau of

Indian Affairs provides management for about 22,000 acres of timberland on the

reservation with a total volume of about 300 million board feet (MMBF). Timber is

harvested on a periodic, uneven basis (Mehrkens 1983: 21). Historically, harvests

have been relatively small compared with those on Native corporation lands or public

lands. The Annette Island Reservation lands are not included in the discussion of

Native timber harvests in this report.

In this section, I will examine the timber volume conveyed to Native corporations in

southeast Alaska. Available estimates of the volume of timber conveyed to Native

corporations provide at best a general indication of timber volume originally available

to Native corporations for harvest, because they are based on limited data and do

not account for the widely fluctuating timber markets that have prevailed since the

conveyance of Native lands.

Two different Forest Service inventory analyses of southeast Alaska timber resources

may be used to estimate the timber volume conveyed to Native corporations. Both

analyses are based on data collected for Forest Service lands during the 1970s,

before the conveyance of some of these lands to Native corporations.

Limitations of Forest Service inventory estimates—A significant problem with

available inventory data is that the ground and photo plot data developed for the

Forest Service inventory analyses were not designed to provide accurate estimates

of inventory for the relatively small areas destined to become Native corporation

lands, but rather were for broader areas within the Tongass National Forest. The

limited number of plots that happened to fall within what were to become Native

lands do not provide a basis for inventory estimates that are anywhere near as

statistically reliable as those for larger areas in the Tongass National Forest. The

estimates thus are subject to a wide margin of error.

Timber inventory or volume can be defined in several ways. Confusing different

concepts of timber volume can lead to significant misinterpretations of available

inventory data for Native lands in southeast Alaska.

Timber Inventories

on Native Lands

Forest Service

Inventory Estimates

5

 USDA Forest Service. 1990 Region 10 Native land

selections statistics as of July 1, 1990. 16 p Unpublished

table. On file with: Institute of Soda) and Economic Research.

University of Alaska Anchorage, 3211 Providence Drive,

Anchorage, AK 99508. This estimate is approximate' the

entitlement will vary depending upon land selections under

sections 14(h)(1), 14(h)(2), 14(h)(3), and (14(h)(5) of ANCSA.

10
The first potential source of confusion is that Forest Service Scribner rule inventory

volume tends to overstate scaled harvest volume in southeast Alaska by more than

20 percent. Thus an adjustment factor must be applied to Forest Service inventory

estimates to estimate potential harvests.

Second, the most commonly published forest inventory data report net timber volume.6

 This is a physical measure of timber theoretically available for harvest. In

southeast Alaska, large areas of timber cannot be harvested profitably, because the

areas are too steep, too remote, too environmentally sensitive, or otherwise inaccessible. Net timber volume thus may greatly overstate the timber volume that could

realistically be harvested from a given ownership.

To project potential harvests, estimates are needed for economic timber inventory,

or the volume of timber that can be harvested profitably. For a given stand of timber,

economic inventory fluctuates depending on market conditions and harvest costs.

The higher the costs of harvesting timber, the greater the fluctuation in economic

inventory in response to changes in timber prices. Because harvest costs on Native

lands in southeast Alaska are high, economic inventory on Native lands has been

highly sensitive to widely changing market conditions during the 1980s.

The sensitivity of economic inventory to market conditions is illustrated by a statement

from a Sealaska official. Although Sealaska Corporation cut several hundred million

board feet of timber from its lands between 1985 and 1988, Sealaska's senior vice

president for resources stated in 1988, "from an economic perspective, we actually

have a larger forest now than we did in 1985. The marginal stands of three years

ago are now marketable. If the market turns down, then the amount of timber we

can economically harvest will shrink" (Sealaska Shareholder 1988).

Economic inventory can be defined or measured only in terms of a given set of

market and cost conditions. I have attempted in this report to estimate economic

inventory for the market and cost conditions at the time of conveyance of Native

lands. The economic inventory remaining in subsequent years depends on timber

harvests and other removals from original economic inventory and on market and

cost conditions.

|t is difficult to measure economic timber inventory for large areas in southeast

Alaska, because local conditions such as slope and access greatly affect economic

operability of timber stands. These conditions are difficult to quantify through aerial

photo inventory techniques and require more expensive on-the-ground surveys.

FIA Inventory estimates—Table 4 presents inventory estimates developed by the

Pacific Northwest Research Station, Alaska Forest Inventory and Analysis unit (FIA).

These are estimates of timberland area and timber volumes as of the mid-1970s on

lands owned in 1985 by private corporations in southeast Alaska (almost all these

6

 Net volume is defined as "the gross volume of a tree less

deductions for rot. sweep, or other defect affecting product

use- (van Hees 1988:10, 11)

11
lands are owned by Native corporations). The estimates of timber areas and volumes

were derived from ground plot inventory data collected between 1970 and 1975.7

Current ownership was established by beating the plots on land status maps for

March 1985 (van Hees 1988: 2).

According to the FIA estimates, the total area of timberland in the mid-1970s on

lands owned in 1985 by Native corporations was 409,000 acres. ("Timberland" is

defined as "forest land producing or capable of producing more than 20 cubic feet

per acre per year of wood under management" [van Hees 1988:11].) This compares

with about 464,000 acres of land conveyed to Native corporations as of 1985. Most

Native land seems to meet the Forest Service definition of timberland.

According to the FIA estimates, net timber volume on Native lands was 10.9 billion

board feet (Scribner rule). Most of this volume was in old-growth western hemlock

(Tsuga heterophylla (Raf.) Sarg.) or hemlock-spruce (Tsuga-Picea) stands.8

These estimates are similar to earlier Forest Service volume estimates for Native

lands. A 1978 Forest Service-sponsored study reported a timber inventory of 11,250

MMBF for Native corporation lands, based on data provided by Sealaska.9

The figure of 10.9 billion board feet must be viewed as a theoretical maximum for

old-growth timber harvests from Native lands. In practice, economic inventory on

these lands would be considerably lower for several reasons. First, there may be

a significant difference between Scribner inventory volume and scaled harvest

volume. According to a Forest Service study (Hutchinson and LaBau 1975:12),

Scaled log volume is only about 73.6 percent of inventory volume. The difference

between inventory and scaled volume is caused by (1) losses from breakage and

other residues during logging, (2) use of the 16-foot-log volume table for inventory

when average scaled length is about 32 feet, and (3) scaling diameters rounded to

the last full inch, whereas inventory volumes are based on rounding diameters to the

nearest inch. The allowance for these factors reduces the inventory volume estimate

by about 26.4 percent. As utilization practices improve, more of the inventory volume

will end up in products.

7

 Ground plot inventory data for the Haines unit was

collected before 1970 No large private corporation

ownerships occur in this area. Personal communication,

January 11, 1989, George Rogers, Inventory Specialist,

USDA Forest Service, Alaska Region, P.O Box 21628,

Juneau, AK 99802-1628.

8

 In general, average timber inventory per acre tended to be

higher on lands conveyed to Native corporations than on

remaining Forest Service lands. Most of the Native corporation land selections were made for their access to highvalued timber. Thus, Native timber tends to be of higher

grade than remaining National Forest timber or in more

favorable locations to harvest (Mehrkens 1984: 25)

9

 Glass, Ronald J. 1978 An assessment of the demandsupply situation for southeast Alaska timber. 54 p. Working

report prepared for USDA Forest Service, Alaska Region.

On file with. Institute of Soda! and Economic Research,

University of Alaska Anchorage, 3211 Providence Drive,

Anchorage, AK 99508.

12
Table 4—Estimated timber Inventory as of mid-1970s on lands owned In 1985

by private corporations In southeast Alaskaa

Species

volume

and

class

Area of

timberlandb

Acres

Net

timber

volumeb

Million

cubic feet

Net timber

volume,

International

1/4-inch ruleb

- - Million boa

Net timber

volume,

Scribner

rulec

rd feet - -

Net timber

volume per

acre,

Scribner rule

Thousand

board feet

Western hemlock

and hemlock-spruce:

Seedlings and saplings 15 22 14

Poletimber

Young growth 14 66 298

Old growth 269 2.044 10,086

Subtotal 297 2,132 10,397 9.550 32

Western redcedar

and Alaska-cedar:

Seedlings and saplings

Poletimber

Young growth

Old growth 72 242 844

Subtotal 72 242 844 742 10

Sitka spruce:

Seedlings and saplings 10 8 34

Poletimber

Young growth

Old growth 18 112 594

Subtotal 29 119 627 586 20

All other:

Seedlings and saplings 4

Poletimber

Young growth

Old growth 7 19 68

Subtotal 11 19 68 63 6

Total:

Seedlings and saplings 29 30 47

Poletimber

Young growth 14 66 298

Old growth 366 2,416 11,591

Total 409 2,512 11,936 10,941 27

a Data are a summary of Forest Service inventory statistics for the private corporation ownership category

for southeast Alaska. Area estimates are based on land status of ground plots as of March 1985 Volume

estimates reflect condtions at the year of inventory (1970-75). b

 Source Data provided by Willem W S van Hees at the request of the author Data available from Willem

W S van Hees, research forester, USDA Forest Service, Pacific Northwest Research Station, Forestry

Sciences Laboratory, Anchorage, AK 99501 c

 Source van Hees 1988: 7.

13
To account for the difference between inventory and scaled harvest volume, the

Forest Service has used, since the early 1960s, an adjustment or fall-down factor

of 0.77 to estimate scaled volume from Scribner rule inventory estimates for the

Tongass National Forest.10Applying this adjustment factor to the FIA estimate of

10,941 MMBF results in a revised estimate of 8,425 MMBF for the scaled harvest

volume that could be cut from Native lands.

Second, the FIA inventory estimates do not distinguish between economic and noneconomic timber stands. The only timber volume not included is that on lands not

capable of producing growth of 20 cubic feet per acre per year. As will be discussed

below, Forest Service inventory data developed during the preparation of the first

Tongass Land Management Plan (TLMP1) suggest that the ratio of economic timber

volume to total timber volume may be only about 70 percent. Applying this ratio to

the figure of 8,425 MMBF results in an estimate of economic timber volume of 5,897

MMBF. Because of the few sample points, this estimate is subject to a wide margin

of error. A Forest Service analyst estimated the sample error for the total FIA cubic

volume at 16.5 percent.11 Applying this same sample error to my estimate of economic timber volume suggests about a 66-percent probability that economic timber

volume conveyed to southeast Alaska Native Corporations by 1985 was between

4,924 and 6,870 MMBF and a 95-percent probability that this volume was between

3,950 MMBF and 7,843 MMBF.12

TLMP1 Inventory estimates —An alternative data base for estimating timber volume

conveyed to Native corporations was developed during the preparation of TLMP1.

This data base was constructed during the late 1970s by coding volume per acre

and operability estimates from interpretations of aerial photograph points.

10 The figure of 73.6 percent cited by Hutchinson and LaBau

(1975- 12) has never been used by the Forest Service The

Forest Service is presently revising inventory estimating

procedures to use a volume equation that assumes a 32-foot

log length. Under this new procedure, an adjustment factor

will no longer be required to estimate harvest volume from

inventory estimates. Personal communications, December 2,

1988, Bill Wilson, Timber Planner, USDA Forest Service,

Alaska Region, P.O. Box 21628, Juneau, AK 99802-1628;

and January 11, 1989, George Rogers, Inventory Specialist,

USDA Forest Service, Alaska Region, P 0 Box 21628,

Juneau, AK 99802-1628.

11 Personal communication, January 11, 1989, George

Rogers, Inventory Specialist, USDA Forest Service, Alaska

Region, P.O Box 21628, Juneau, AK 99802-1628

12 In theory, a sample error of 16.5 percent means that there

is about a 66-percent probability that the true volume is

within 165 percent of the estimated volume, and about a

95-percent probability that the true volume is within 2 x 16.5

or 33 percent of the estimated volume Applying this same

sample error to the total board foot volume would imply a

sample error of 1,805 MMBF. Reducing this figure by the

adjustment factor of 0.77 and the economic operability ratio

of 0.70 results in a sample error of 973 for this estimate of

economically operable timber volume.

14
Table 5 shows Forest Service estimates, based on the TLMP1 data base, of the

total area of forest land conveyed to Native corporations by volume class and

operability.13 The estimated total timberland area on Native lands was 409,000

acres.14

Because the TLMP1 data are coded by volume class and operability, these data can

be used to derive a crude estimate of economic timberland area on Native lands. A

liberal assumption is that all stands of "normal" operability in volume classes greater

than 20 thousand board feet (MBF) per acre are "economically operable."15 By this

definition, only 218,000 acres, or a little more than half of the total timberland area

conveyed to Native corporations, was economically operable.

The TLMP1 estimates of forest area on Native lands can be used to estimate total

and economic timber volume on Native lands by multiplying the area in each volume

and operability class by assumed average volumes per acre. Assumptions of average scaled harvest volume per acre for TLMP1 data were developed by the Forest

Service from a previous inventory in which photo interpretations were compared with

ground measurements of plots. These assumptions allow for losses from breakage,

losses in delivery, and hidden defects.

Table 6 shows estimated timber volumes based on these volume-per-acre assumptions. The estimated total timber volume on Native lands was 9.5 billion board feet.

Sealaska lands accounted for about 44 percent of the total forest area and volume

conveyed to Native corporations.

Under my liberal definition, economic timber volume was 6.7 billion board feet. Economic timber volume was only about 70 percent of total timber volume. Put differently,

about 30 percent of total Native timber volume was either in nonstandard or inoperable stands or in stands with volumes less than 20 MBF per acre.

13 Slightly differing figures from the TLMP1 data base for

Native ownership by volume class were published by the

USDA Forest Service (1988a' 67) in response to a question

asked by the Southeast Alaska Conservation Council.

14 This is identical to the area estimate in table 4 Apparently

the forest area estimates are based on the same coding of

the ownership status of ground plots

r5 The Forest Service defines operable timberland as "all

timberland considered silviculturally and economically operable This includes areas on stable soils, on slopes that are

not too steep to log without causing site damage and stands

valuable enough to pay logging costs using methods and

costs in effect at the time of the inventory." Inoperable timberland "includes areas of timberland that are presently

inoperable because of marginal volume (usually less than

20,000 board feet per acre) or rough, rocky, cliffy, or

otherwise broken terrain. This also includes pockets of

high-volume timberland that are isolated or more than

one-fourth mile from operable timberland areas" (van Hees

1985' 6, 8). The liberal assumption that all stands with

volumes exceeding 20 MBF per acre are economic is based

on conversations with industry and Forest Service representatives. Some observers suggested that a higher volume

per acre would be a more realistic cutoff.

15
Table 5—Forest Service estimates of area of forest land conveyed to southeast Alaska Native corporations,

by volume class and operabilitya

Volume class (MBF/acre)0

Owner

Village

corporations

Sealaska

Total

Operability

Normal

Nonstandard

Inoperable

Total

Normal

Nonstandard

Inoperable

Total

Normal

Nonstandard

Inoperable

0-8

12,220

505

166

12,891

8.441

166

174

8,781

20,661

671

340

8-20

56,372

10,602

6,622

73,596

40.478

10,252

5,817

56,547

96,850

20,854

12,439

20-30

68,086

12,223

1,285

81,594

53,726

12,243

2,050

68,019

121,812

24,466

3,335

30-50

36,267

5,486

62

41,815

31,286

3,495

1,317

36,098

67,553

8,981

1,379

50+

17,480

628

0

18,108

10,897

82

87

11,066

28,377

710

87

Total

area

190.425

29,444

8,135

228,004

144,828

26,238

9,445

180,511

335,253

55,682

17,580

economically

operable

area

121,833

121.833

95.909

95,909

217,742

Total 21,672 130,143 149,613 77,913 29,174 408,515 217,742

a

 Because of relatively low number of sample points, reliability of area estimates may be low, especially for specific volume classes b

 Ownership coding is as of 1985

c

 Volume class bounds are Scribner scale with the exception of 8 MBF/acre, which is International 1/4-inch scale. d

 Economically operable area includes only area of "normal" Operability in volume classes greater than 20 MBF/acre

Source Data extracted at the request of the author from USDA Forest Service TLMP1 data base by USDA Forest Service, Alaska Region

Area estimates are based on approximately 5,100 points from the TLMP1 data base, which was constructed in the late 1970s by coding

volume per acre and Operability estimates from interpretations of aerial photograph points

A more conservative definition of "economic Operability" would have resulted in a

significantly lower estimate of economic timber volume. For instance, if it were

assumed that one-third of the volume in the 20-30 MBF per acre volume class with

normal Operability was not economically operable, this would reduce the estimate of

economic volume would be reduced by nearly 1 billion board feet, to 5.7 billion board

16 feet.

My estimate of economic volume is based in part on the Forest Service definition of

"normal" Operability, which reflects Forest Service Operability and usage standards

as of the late 1970s. I do not know whether these standards overstate or understate

Operability and usage for Native corporations. Native corporations face less restrictive

and expensive standards in harvesting and marketing timber than does the Forest

Service. Unlike timber harvested from public lands, Native corporation timber harvests may be exported as round logs. Native corporations also face less stringent

16 Harvest data for 29 harvested areas on public lands and

28 harvested areas on private lands were gathered in a 1987

study of harvest residues in southeast Alaska Harvest volume

per acre ranged between 13 and 70 MBF on public lands

and between 21 and 49 MBF on private lands (Howard and

Setzer 1988 43)

16

------------------------------ Acres-------------------------
Table 6—Estimated timber volume on forest land conveyed to southeast Alaska Native corporations, by

volume class and Operabilitya

Volume class (MBF/acre)0 economically

Owner

Village

corporations

Sealaska

Operability

Normal

Nonstandard

Inoperable

Total

Normal

Nonstandard

Inoperable

0-8

73

3

1

77

51

1

1

8-20

738

139

87

964

530

134

76

20-30

1,614

290

30

1,934

1,273

290

49

30-50

1.306

197

2

1,505

1,126

126

47

50+

832

30

0

862

519

4

4

Total

volume

4.563

659

120

5,343

3,499

555

177

operable

volume

3,751

3,751

2,918

Total 53 741 1,612 1,300 527 4.232 2.918

Total,

All

Native

lands

Normal

Nonstandard

Inoperable

Total

124

4

2

1,269

273

163

2,887

580

79

2,432

323

50

1,351

34

4

8,062

1,241

298

6.670

130 1,705 3,546 2,805 9.574 6,670 1,389

a

 Total volume estimates were calculated by multiplying estimated areas shown in table 5 by assumed average volumes per acre for each

volume class, regardless of Operability. Assumed average volumes per acre for each volume class were as follows. 0-8 6.0, 8-20. 13.1, 20-30

23.7; 30-50- 36 0; 50+. 47 6 These volume estimates are for bureau scale and are intended to estimate net volume as scaled at delivery,

allowing for breakage, losses in delivery, hidden defects, and 32-foot logs Assumed volumes per acre were based on a previous inventory in

which photo interpretations were compared with ground measurements of plots "Economically operable" volume estimates were calculated by

using the same method but included only areas with "normal" Operability and volume classes greater than 20 MBF/acre Because of relatively

low number of sample points, reliability of volumes estimates may be low, especially for specific volume classes b

 Ownership coding is as of 1985.

c

 Volume class bounds are Scribner scale with the exception of 8 MBF/acre, which is International 1/4-inch scale. d

 Economically operable area includes only area of "normal" Operability in volume classes greater than 20 MBF/acre

standards for road construction and retention of old growth (to protect multiple-use

values) than does the Forest Service. By themselves, these factors might increase

the economic timber inventory of Native corporation lands compared with similar

timber stands on Forest Service lands.

These factors may be more than offset by the ability of the Forest Service to

subsidize timber harvests through road building and other investments. In addition,

Forest Service timber-use requirements result in greater volume removals from a

given timber stand than Native corporations would achieve, because high-value logs

are required to subsidize the harvest of logs that might not "pay their own way out

of the woods" on Native lands.1?

17 In theory, timber on private lands is harvested only if the

marginal profit is positive. On public lands, usage standards

may require harvesting some timber having a negative

marginal profit, although average profit remains positive.

17

------------------------------------------------------------------MMBF-----------------------------------------------
No estimate of standard error was available for either the TLMP1 area or volume

data. Because of the relatively few sample points on which these data are based, it

is likely that the estimates are subject to a similar margin of error as the FIA data,

especially for specific volume and operability classes. Given the wide margin of

error associated with each, the FIA and TLMP1 volume estimates are consistent: the

liberal TLMP1 figure of 6.7 billion board feet for economically operable timber volume

and the more conservative figure of 5.7 billion board feet both fall within the FIA

66-percent probability range of 4.9 to 6.9 billion board feet.

Other Inventory Estimates The only other estimates of timber inventory conveyed to Native corporations have

been undertaken by or for the corporations themselves. Most of these estimates are

not publicly available, although some information on timber inventories and appraisals

has been published in Native corporation annual reports. Many of the corporations

have substantially revised their estimates of timber inventories and values at conveyance, based on harvest experience. Differences in timber recovery and species

mix from that assumed in original inventories have been important factors in these

reappraisals.

Probably the most comprehensive inventory of timber holdings on Native lands was

undertaken by the firm Mason, Bruce and Girard, Inc., for Sealaska Corporation and

10 of the 12 village corporations. The survey estimated timberland area, timber volume, and timber quality on lands conveyed to these corporations as of July 1, 1981.

It was based on both aerial photography and on-the-ground field work. Results of the

Mason, Bruce and Girard survey are not available publicly except for summary figures

for Sealaska lands (Sealaska Corporation 1982: 8; 1986: 37). According to the survey, of the 194,000 acres of timberland conveyed to Sealaska by July 1,1981, about

75 percent was commercial grade forestland, 11 percent was noncommercial forestland, and 14 percent was nonforestland. Western hemlock represented 56 percent of

the net merchantable volume of timber, Sitka spruce (Picea sitchensis (Bong.) Carr.)

represented 33 percent, and western redcedar {Thuja plicata Donn ex D. Don), and

Alaska-cedar {Chamaecyparis nootkatensis (D. Don) Spach) represented 9 percent

and 2 percent, respectively. The survey reported a net merchantable timber volume

in operable areas of 2,997 MMBF. This figure is fairly close to the TLMP1 estimate of

economic timber volume for Sealaska of 2.9 billion board feet.19

18 A timber planner with the USDA Forest Service, Alaska

Region, suggested that the data in table 6 might well

overstate or understate timber volume by as much as

20 percent Personal communication. December 2, 1988,

Bill Wilson, Timber Planner, USDA Forest Service, Alaska

Region, P 0 Box 21628, Juneau, AK 99802-1628

19 Sealaska Corporation land area increased by only a few

thousand acres between 1981, the year of the Mason. Bruce

and Girard survey, and 1985, the year for which the Forest

Service estimated Native forest area and inventory USDA

Forest Service 1990 Region 10 Native land selections

statistics as of July 1, 1990. 16 p Unpublished table On file

with. Institute of Social and Economic Research, University of

Alaska Anchorage, 3211 Providence Drive, Anchorage, AK

99508.

18
The Mason, Bruce and Girard estimate for economic volume on Sealaska Corporation lands being fairly close to the TLMP1 estimate lends increased confidence to

the TLMP1 estimate; however, neither estimate allows for the effect of changing

market conditions on the volume of timber that could be economically removed.20

Summary of Inventory

at Conveyance

Native Corporation

Timber Harvests

to Date

Timber Harvests

Only limited data on timber volumes originally conveyed to southeast Alaska Native

corporations are available publicly. Estimates based on these data are subject to a

wide margin of error. Figure 3 summarizes these estimates. Available data suggest

that Native corporations may have originally received about 409,000 acres of

timberland with a total standing timber volume of about 10 billion board feet. As little

as half of this total timber volume was economic even under the favorable market

conditions at the time of conveyance. There is about a two-thirds probability that

economic timber volume at the time of conveyance was between 4.9 and 6.9 billion

board feet and a 95-percent probability that economic volume was between 4.0 and

7.8 billion board feet.

Timber harvests and other removals from inventory have shaped the current inventory

situation on Native lands. I will present available data on Native timber harvests and

examine markets for Native timber, which were severely depressed from 1981

through 1986 but have subsequently rebounded strongly. I will then discuss why

removals from economic inventory may have significantly exceeded reported timber

harvests. Finally, I will give low, medium, and high estimates for total removals from

economic timber inventory on Native lands to date.

There are no formal requirements for reporting of timber harvests by Native corporations or other private landowners in Alaska. Substantial inconsistencies occur in

different estimates of Native harvests prepared by several public agencies.

The Forest Service has published various estimates of harvests from Native lands

in its annual Timber Supply and Demand reports for the Tongass National Forest

(Mehrkens 1983. 1984, 1985; Mehrkens and Miller 1987; USDA Forest Service 1982,

1986b, 1988b, 1989,1990). Four of these sets of estimates are shown in table 7.

20 A crude estimate of timber volume conveyed to Native

village corporations can be arrived at by dividing total initial

appraised timber value by an assumed average appraised

value per MBF Ten of the twelve village corporations

reported initial timber value appraisals (presumably based on

'the Mason, Bruce and Girard survey) These appraisals

totaled $742.426,000 Three of these corporations also

reported inventory volumes for recoverable timber with

average appraised values of $113/MBF, $100/MBF, and

$90/MBF Assuming an average appraisal of $100/MBF for

all 10 corporations results in an estimated total volume of

7,425 MBF, which is almost twice as high as our TLMP1

estimate for "economically operable" volume on village

corporation lands Given the very rough nature of this

estimate and the problems Native corporations have reported

with their initial appraisals, little confidence can be placed in

this figure

19
Figure 3—Estimates of original timber volume conveyed to southeast Alaska Native corporations Estimates for left bar based on Forest Inventory and Analysis data, estimates

for center bar based on Tongass Land Management Plant (TLMP1) data, and estimates

for right bar based on Mason, Bruce and Girard data

Until 1987, the Forest Service published harvest estimates by calendar year. These

estimates were derived by contacting Native corporations and asking how much

timber they had harvested; however, not all corporations were contacted or were

willing to provide this information. A Forest Service economist who helped to prepare

these estimates has stated that they were probably reliable within about 10 percent

either way.21 In the 1988 report (USDA Forest Service 1988b), a different set of

harvest estimates, calculated similarly, was shown by fiscal year.

21 Personal communication, March 24. 1989, Les Miller,

Economist, USDA Forest Service, Alaska Region, Box

21628, Juneau, AK 99802-1628

20
Table 7—Estimates of timber harvests on southeast Alaska Native corporation lands

Estimates

Year

Alaska

Department of

Forest Forest Forest Forest Commerce and Alaska

Service Service Service Service Economic Department of

1987 1988 b 1989 1990 d Development Fish and Game.

(calendar year)a (fiscal year) (fiscal year)c fiscal year) (calendar year)e (calendar year)f

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

19g

70h

122

209

232

202

263

299

335

385

MMBF

19g 19g 19g

62 145 145

113 67 89

194 159i. 157i

228 292i 304i

207 258i 290i

253 272i 286i

293 296i 355i 315 j

396 411 336l

408 372l

613

Cumulative totals:

Through 1986 1416

Through 1987

Through 1988

Through 1989

1368 1508 1645

1703 1904 2056

2289 2464

3077

a

Source (except for 1979 and 1980)- Mehrkens and Miller 1987. 5.

b

 Source USDA Forest Service 1988b- 6

c

 Source: USDA Forest Service 1989- 2.

d

 Source- USDA Forest Service 1990-10.

e

 Export logs only Pulp log factor reported to be 25 to 30 percent of export sawlog volume Based on telephone surveys by the Department of Commerce and

Economic Development, Division of Business Development 1986 figures are from December 1987 summary report 1987 and 1988 figures are from November

1987 summary report (20 MMBF were subtracted from estimate for all southeast export logs to allow for harvests on other private and public lands). f

Based on Alaska Department of Fish and Game. Division of Habitat summaries of Forest Practices Act harvest notification reports ("actual" figures for notification

areas from previous years) See text for discussion of methodologies used to estimate timber harvests.

g

 Source' Rogers, George W 1985 The southeast Alaska regional economy and communities' evolution and structure. Prepared for U S Department of Agriculture,

Forest Service, Region 10, Juneau, AK. Anchorage Institute of Social and Economic Research, University of Alaska, Anchorage November 83 p On file with

Institute of Social and Economic Research. University of Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508 USDA Forest Service, Region 10 is

cited as the original source.

h

 Source' Mehrkens 1983 5

i

May include about 20-40 MMBF harvested from private lands in south-central Alaska.

j

Source- Forest Products Desk, Division of Business Development, Department of Commerce and Economic Development, State of Alaska. 1987 Alaska export

quality sawlog supply information Unpublished table [December] On file with. Institute of Social and Economic Research, University of Alaska Anchorage, 3211

Providence Drive, Anchorage, AK 99508. Figure includes only harvests of export quality sawlogs Pulp log factor is indicated as 25 to 30 percent of export saw-log

volume 15 MMBF was subtracted from export log harvest total to allow for harvests on other private and public lands

k

Estimate prepared by author based on Alaska Department of Fish and Game, Division of Habitat, summaries of Forest Practices Act harvest notification reports

l

Source-Alaska Department of Commerce, Division of Business Development 1988 Southeast Alaska forest product exports Unpublished table [November] On

file with Institute of Social and Economic Research, University of Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508. Figure includes only exports of

logs 20 MMBF was subtracted from export log total to allow for harvests on other private and public lands

21

369k
In the 1989 report (USDA Forest Service 1989). Native corporation harvests were

estimated from Alaska export and import data from the U.S. Department of Commerce. Total southeast and south-central Alaska harvests were estimated from net

exports of logs and net exports of other forest products (cants, pulp, and woodchips)

that were multiplied by assumed ratios of log use per unit of production. Native corporation harvests were assumed equal to estimated total harvests minus harvests

from public lands. This methodology is more rigorous than earlier procedures for

estimating Native timber harvests. It is dependent, however, on several assumptions

about ratios of final production to log use and the domestic consumption of Alaska

wood products. Other problems are that for some years it was not possible to distinguish between Native corporation timber harvests from southeast and south-central

Alaska, and the timing of exports may significantly lag the timing of harvests.

In the 1990 report (USDA Forest Service 1990) a similar methodology was used.

Estimated pulp log harvests were somewhat higher, however, thereby resulting in

higher estimates of total harvests than in the 1989 report.

Despite year-to-year differences, the Forest Service harvest estimates shown in table

7 appear roughly similar for cumulative harvests from Native corporation lands. The

higher cumulative figures for the 1989 and 1990 estimates could result in part from

the inclusion of some south-central Alaska harvests.

Despite their limitations, these data represent the best available estimates of timber

harvests to date by Native corporations in southeast Alaska. They suggest that as

much as 3 billion board feet of timber were harvested on Native lands between 1979

and 1989. Except for a slight decline in 1984, the level of timber harvests increased

every year to annual levels of about 400 MMBF in 1987 and 1988. In 1989, harvests

increased substantially to about 600 MMBF.

A few other estimates of Native corporation timber harvests for recent years are

shown in table 7. These are roughly similar to the Forest Service estimates. Estimates

by the Alaska Department of Commerce and Economic Development and the Alaska

Department of Fish and Game suggest that total harvests (including pulp logs) may

have been more than 350 MMBF in 1986 and more than 400 MMBF in 1987 and

1988.22

22 In 1987 and 1988, the Alaska Department of Commerce and Economic Development (DCED) estimated Native harvests from discussions with some but not all

Native corporations. In 1987, DCED estimated total log exports from Native lands at

315 MMBF in 1986 and 335 MMBF in 1987, with a "pulp log factor of 25 to 30% of

export sawlog volume." (Source* Forest Products Desk, Division of Business Development, Department of Commerce and Economic Development, State of

Alaska. 1987. Alaska export quality sawlog supply information Unpublished table

[December] On file with Institute of Social and Economic Research, University of

Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508) This would imply

total harvests in each year of about 410 MMBF. In 1988, DCED estimated total log

exports from southeast Alaska at 356 MMBF in 1987 and 392 MMBF in 1988

(Source: Alaska Department of Commerce, Division of Business Development

1988 Southeast Alaska forest product exports Unpublished table. [November]. On

file with' Institute of Social and Economic Research, University of Alaska Anchorage,

3211 Providence Drive, Anchorage, AK 99508) Assuming 20 MMBF of log exports

from other private and public lands results in log exports of 336 MMBF in 1987

and 372 MMBF in 1988. If pulp log harvests are allowed for, then this would imply

harvests of well over 400 MMBF in each year. Indirect harvest estimates also have

been calculated by the Alaska Department of Fish and Game, Division of Habitat,

based on Alaska Forest Practices Act harvest notification reports. Estimated actual

harvests for 1986 were 369 MMBF. Estimated proposed harvests for 1987 were

450 MMBF Some Native corporations have reported timber harvests in their annual

reports. Because these are available only for some corporations in some years, they

do not provide a basis for estimating total Native harvests

22
Markets for Native The major products produced on Native lands are hemlock, spruce, and cedar logs.

Timber The primary market for these togs is Japan, with some shipments to Korea and to

China (Sealaska Corporation 1983:10). Hemlock, spruce, and cedar logs accounted

for 51 percent, 37 percent, and 8 percent, respectively, of all log exports from Alaska

between 1980 and 1988. most of which were harvested from Native lands (Warren

1989:27).

Unlike timber harvested from the Tongass National Forest. Native timber harvests

are not subject to primary processing requirements. Whereas most saw logs harvested from National Forest lands are cut into cants before export, most Native

timber is exported as round logs.

Although round log exports are the most important market for Native timber, utility

logs (lower grade logs that cannot be exported) form an important component of

timber harvest volume. The primary markets for utility logs are the two southeast

Alaska pulp mills. Depending on market conditions, utility logs can represent as

much as 30 percent or more of the volume of export logs from a given harvest

area.

Markets for export logs—Prices for Alaska export logs were at historically high

levels in 1980 when large-scale timber harvests were beginning on Native lands. By

1983, with world timber markets in a deep depression, export log prices had fallen

sharply. In 1987 and 1988, export log prices rebounded, and by 1989 markets were

at or above 1980 levels.

Table 8 and figure 4 show average prices of softwood log exports of spruce and

hemlock from Alaska from 1980 through 1989. Average spruce prices declined by

almost 15 percent between 1982 and 1984. and average hemlock prices declined by

almost 30 percent between 1982 and 1986. These averages may significantly mask,

however, the severity of the decline in prices for export logs, because as prices fell,

fewer tow-grade togs were exported.

Cape Fox Corporation (1983: 5, 6) reports that average timber prices received by the

corporation declined from $750/MBF in 1980 to $375/MBF in 1982. With rising log

production costs, the return to the corporation from trees sold dropped 45 percent in

only a 2-year span.

Prices for export logs differ widely depending on species and grade. During the

fourth quarter of 1988, for example, one Native corporation reported prices as high

as $2640/MBF for select spruce logs and as low as $288/MBF for the lowest grade

spruce togs, with an average value of $1286/MBF for all spruce logs. High-quality

Sitka spruce tends to be more insulated from market cycles and competition, while

supplies of lower quality spruce and hemlock fluctuate widely in response to international tog and lumber prices (Mehrkens and Miller 1987:17). Price declines during

the mid-1980s were greatest for lower grade hemlock.

Although the general market conditions described above have affected all corporations, specific market conditions have differed widely among corporations as a result

of differences in species mix and grade, volumes of timber available for sale, and

corporate marketing expertise.

23
Table 8—Average value of spruce and hemlock log exports from Alaska"

Year Spruce Hemlock

----$/MBF----

1980

1981

1982

1983

1984

1985

1986

1987

1988

19896

553.26

578.85

577.74

511.54

496.00

527.64

541.12

587.59

641.21

603.85

408.29

382.17

424.61

358.71

319.97

310.28

302.54

371.37

411.46

412.08

a

 Derived from U.S. Department of Commerce

export statistics. The valuation definition used in

the export statistics is the value at the seaport or

border port of exportation. b

First 3 quarters only

Source. Warren 1989: 27.

Figure 4—Average value of spruce and hemlock log exports from Alaska. Data for 1989 are

for first three quarters

24
Marketing is complicated by a lack of local markets and by inventories consisting of

a mix of highly sought after old-growth timber and significant volumes of defective

timber. For most corporations, volumes are too low to sort shipments of different

species or grades specifically for customers in different locations overseas. During

times of poor markets, corporations may have to significantly discount some grades

of logs to sell other more valuable grades that are part of the same shipment. At

other times, purchasers may pay more for lower grade timber to have access to

higher grade timber.

Utility log markets—Although round log exports are the most important market for

Native timber, markets for lower quality utility logs have a significant effect on the

profitability of timber harvests.

In 1980, the first year of significant harvests by Native corporations, the two southeast Alaska pulp mills in Sitka and Ketchikan provided a market for utility logs. Beginning in 1981, however, it became increasingly difficult for Native corporations to sell

utility logs owing to depressed markets. By 1982, many pulp quality logs on Native

land were being left in the woods. In 1983, southeast Alaska pulp mills began to

import lower cost logs from British Columbia, which further displaced Alaska's lower

quality timber in local pulpwood markets (Mehrkens 1983: 4,1984:5; USDA Forest

Service 1986b: 31).

In contrast to the market for high-quality timber, in which the Native corporations had

an advantage because of their exemption from primary processing requirements,

Native corporations could not compete effectively with pulp tog supplies from Federal

lands. In 1985. Sealaska Corporation stated (USDA Forest Service l986a: 93) that

the Forest Service's practice of offering an average of 450 million board feet of

timber each year during periods of depressed timber markets had

...compounded the difficulty faced by the Southeast Alaska ANCSA corporations in

finding local markets for pulpwood and low-quality saw logs produced from their

timberlands...and has had an adverse impact on the ANCSA corporations' efforts

to...achieve reasonable prices for timber which does not meet export market

standards. Market conditions can and have dramatically affected the utilization

standards on these private lands....While private timberland owners have continued to work toward greater utilization of the low-quality timber on their lands,

actions taken by the USES in the management of the Tongass National Forest have

continually worked to the detriment of these efforts. Actions taken related to waiver of

primary manufacturing requirements, salvage sale management, waivers on contract

requirements, imports of timber from Canada, high level of timber being put on the

market during depressed conditions, and subsidy of operations through the use of

the Tongass Timber Supply Fund have virtually assured that purchasers of, Federal

timber will have no need to purchase lower-quality timber from private timberland

owners to supply manufacturing facilities in Southeast Alaska.

Pulp markets have improved in recent years. The export price of Alaska pulp exports

increased by 83 percent between 1986 and 1989 (USDA Forest Service 1990:19).

Reflecting the improvement in markets, operating rates at the two pulp mills increased

from 55 percent in 1985 to 70 percent in 1986, 75 percent in 1987, and full capacity

in 1988 and 1989 (USDA Forest Service 1988b: 3. 1989:18, 1990: 21). With this

improvement in markets, pulp log sales by Native corporations have increased, both

to the two Alaska pulp mills and to mills in British Columbia (USDA Forest Service

1990:16).

25
Harvest Costs

Table 9 shows Forest Service estimates of Native corporation harvests of export logs

and pulp logs. These figures suggest that about 73 percent of total Native timber harvest volume has been sold as export logs, and the remaining 27 percent has been

sold as pulp logs. Pulp log sales declined relative to total sales during the depressed

market of the mid-1980s.23

Other information on the share of pulp logs in total harvests is limited. The Forest

Service reports (USDA Forest Service 1982: 56) that "32.3 MMBF of Native timber

was sold locally as pulp material in 1980."24 This would represent about 46 percent

of total harvests in 1980. Sealaska Timber Corporation reportedly sold about 20 to

35 percent of its initial harvests to pulp mills (Whitly 1982:12). Pulp logs represented

20 percent of Kake Tribal Corporation's timber harvest in 1981 (25 percent of sawlog harvests) and 22 percent of total harvests in 1985 (28 percent of saw-log harvests) (Kake Tribal Corporation 1983: 7, 1985: 3).25

Timber harvest costs are high in southeast Alaska. As a result, the profitability of

timber harvesting and the economic timber inventory on Native lands was highly

sensitive to widely changing market conditions during the 1980s.

Major costs include road construction, log dump construction, camp construction,

logging, log truck haul, dumping, and rafting. For any given market conditions, the

profitability of harvesting depends on several factors, which may differ greatly among

various harvest areas; the factors include the volume, species, and grades of timber

to be harvested; the period over which harvests will occur; the length of roads to be

constructed and the terrain where road construction and harvests will take place; the

existence of log transfer facilities and camps; and the experience and skill of road

construction and logging crews. Because Native corporations compete with other

landowners for contractors, harvest costs for Native lands are sensitive to the total

level of logging activity in southeast Alaska.

23 Year-to-year estimates of pulp harvests may not be

reliable because the harvest estimates are based on export

data and the timing of pulp exports may considerably lag

timber harvests

24 This figure is considerably less than the estimate of

62 MMBF reported in table 8, which suggests that at least

one of the figures is incorrect.

25 In studies done for the Tongass Land Management Plan,

the Forest Service assumed that low-quality timber from

Native ownerships would be made available to local pulp

producers at an average rate of 14 percent of total spruce

volume (16 percent of saw-log volume) and 30 percent of

total hemlock volume (42 percent of saw-log volume) Overall, utility logs would constitute 24 percent of total volume

(32 percent of saw-log volume), based on an assumption that

spruce harvests would represent 29 percent of total volume

(USDA Forest Service 1982 88).

26
Table 9—Forest Service estimates of harvests of export saw logs

and pulp logs from southeast Alaska Native corporation lands

Fiscal Export Pulp Export Pulp

year saw logs logs Total saw logs logs

------ MMBF------ ---percent---

1980a 83 62 145 57 43

1981 32 58 89 35 65

1982b 137 20 157 87 13

1983b 249 54 304 82 18

1984b 202 88 290 70 30

1985b 225 61 286 79 21

1986b 296 59 355 83 17

1987 286 125 411 70 30

1988 286 121 408 70 30

1989 420 193 613 69 31

Total 2217 840 3057 73 27

a

 Source: USDA Forest Service 1989: 2.

b

 May include about 20-40 MMBF harvested in south-central Alaska.

Source. USDA Forest Service 1990:10.

A 1978 Forest Service study26 estimated average costs of $162 per thousand board

feet of timber processed for round log exports, based on costs reported for National

Forest sales. The breakdown of these costs was $48 for permanent road construction, $21 for temporary road construction, $63 for logging, $8 for log truck haul, $6

for dumping and rafting, $5 for milling cost from pond breakdown to free-on-board

(FOB) shipping including sales cost, and $11 for transportation of pulp logs to market.

These figures reflected the cost of an 8-mile haul. They do not reflect the cost of

construction of dumping or rafting facilities. Discussions with industry sources suggest

that harvest costs may have been as much as 50 percent higher or more on some

Native lands.

Cape Fox Corporation (1980:10; 1981: 8) reports that logging costs represented

56 percent of harvest costs in 1980 and 50 percent of harvest costs in 1981; roads

represented 26 percent of harvests costs in 1980 and 35 percent of harvests costs

in 1981. Overall, harvest costs were 39 percent of total timber value in 1980 and

44 percent of total timber value in 1981.

26 Glass, Ronald J 1978. An assessment of the demandsupply situation for southeast Alaska timber. Juneau, AK

54 p. Working report prepared for U.S Department of

Agriculture, Forest Service, Alaska Region. On file with:

Institute of Social and Economic Research, University of

Alaska Anchorage, 3211 Providence Drive, Anchorage, AK

99508.

27
Because of high fixed costs, logging operations require a high timber volume to be

profitable. According to one industry observer, a corporation needs about a shipload

per quarter of export quality logs (about 4 MMBF per quarter or about 15 MMBF per

year) to sustain harvesting operations.27

Other Removals From Estimates of timber harvests from Native lands were presented above. These estiTimber Inventory mates are for actual log sales by Native corporations. Because of the depressed

market conditions during the mid-1980s, the volume of timber effectively removed

from the original economic timber inventory conveyed to Native corporations may

have considerably exceeded estimated timber harvests. There are two primary

reasons for this.

First, during depressed markets, large volumes of lower grade timber were left on the

ground because the cost of removing it exceeded its market value. The Southeast

Alaska Conservation Council claimed in 1985 that "Native corporations have exported

a small amount of pulp logs and have left in the woods as much as 20 percent of the

timber volume in their harvest areas" (USDA Forest Service 1986a: 93).

A 1988 study (Howard and Setzer 1988) of logging residue in southeast Alaska estimated residue volumes on public and private lands harvested in 1984 and 1985. For

29 publicly owned units, the net volume of chipable wood residue was estimated at

79 cubic feet per thousand board feet of timber harvested. In comparison, for 28 privately owned units, the study estimated the net volume of chipable wood residue at

109 cubic feet per thousand board feet of timber harvested (Howard and Setzer 1988:

20). In other words, the net volume of residue on private lands was 30 cubic feet per

thousand board feet harvested higher than on public lands. If a ratio of 4 board feet

per cubic foot is assumed, it implies that residues on private lands exceeded residues

on public lands by 120 board feet per thousand board feet harvested. Put differently,

harvesting the private lands according to the same use standards as the private lands

would have increased the total harvest on private lands by more than 10 percent.

Given economic inventory estimates based on Forest Service use standards, removals from Native economic inventory during this period would have been 10 percent

greater than reported total harvests.

The second reason is that in areas harvested during depressed timber markets,

marginal timber in lower volume stands or at the edges of harvest areas may have

been left standing that would have been removed had prices been higher. Much of

this timber left on the stump may no longer be economically accessible, because of

the high fixed set-up costs of new logging operations and the high volumes needed

to support a new timber harvesting operation.

Without better data, it is impossible to know exactly how much timber volume has

been removed from economic inventory because it was left on the ground or on the

stump on Native lands harvested during depressed markets. It seems reasonable to

assume, however, that this volume may have been as great as 20 percent of total

harvests from 1983 to 1986.

27Personal communication, March 23, 1989, Frank A

Seymour, Marketing Specialist, Division of Business

Development, Alaska Department of Commerce and

Economic Development, P.O. Box D, Juneau, AK 99811.

28
Total Removals From

Timber Inventory

Factors Affecting

Native Corporation

Harvests

Village Corporation

Harvests

Available data on timber harvests and volumes of timber left on the ground or on the

stump in harvested areas are insufficient to determine exactly how much timber has

been effectively removed from the economic inventory originally conveyed to Native

corporations. A reasonable range for the volume of total removals from inventory can

be determined instead.

Table 10 shows three different estimates of total removals from inventory. The low

estimate is based on the lowest timber harvest estimates published by the Forest

Service and on an assumption that other removals were 10 percent of harvests

between 1983 and 1986. The high estimate is based on the highest timber harvest

estimates published by the Forest Service and on an assumption that other removals

were 20 percent of harvests between 1983 and 1986. The medium estimate is based

on intermediate assumptions for harvests and other removals. These estimates suggest that a reasonable range for total removals from Native economic inventory from

1979 to 1989 is between 2800 and 3300 MMBF.

Table 11 compares estimates of harvests on village corporation lands with harvests

on Sealaska Corporation lands.28 Although Sealaska received about 44 percent of

the timber inventory conveyed to Native corporations, harvests from Sealaska lands

accounted for only 21 percent of Native harvests through 1989. Thus the village

corporations have harvested their timber at a much faster rate than has Sealaska.

The timing of harvests also has differed between village corporation and Sealaska

lands. Village corporation harvests increased dramatically from 1982 to 1986 while

timber markets were depressed. In contrast, Sealaska harvests stayed near or below

1981 levels during this period and increased sharply when timber markets improved

in 1987.

Southeast Alaska village corporations have had a wide range of experiences with

timber harvests: several village corporations have made large profits from timber

harvests, and one was the first Alaska Native corporation to declare bankruptcy. As a

result, there are significant exceptions to almost any generalization that might be

made about village corporations. There are several reasons for the differences in

experience among village corporations: the volume and quality of timber resources

conveyed differed significantly among corporations; conveyances and timber harvests

were significantly delayed for some corporations as a result of legal disputes, which

were resolved in some cases by land trades; and management objectives and

expertise also have differed widely among corporations, as have experiences with

subcontractors and partners.

28 Estimated village corporation harvests were calculated by

subtracting reported Sealaska harvests from estimated total

harvests As reported above, there are considerable

differences in available estimates of total harvests. As a

result, estimated village corporation harvests are less reliable

than reported Sealaska harvests, which are based on figures

provided in corporate annual reports

29
Table 10—Low, medium, and high estimates of removals

of timber from economic Inventory on southeast Alaska

Native corporation lands through 1989

Estimatesa

MMBFHarvests:

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

19

62

113

194

228

207

253

293

335

385

613

19

145

67

159

292

258

272

296

396

385

613

19

145

89

157

304

290

286

355

411

408

613

Total 2701 2902 3077

Other removals

All removals

98

2799

224

3126

247

3324

a

 All harvest estimates are based on data presented in table 7 All estimates

assume Forest Service 1990 estimates for 1989 harvests

b

 Assumes Forest Service 1988 estimates for 1979-87 harvests and Forest

Service 1989 estimates for 1988 harvests Assumes other removals were

10 percent of harvests during the period 1983-86 c

Assumes Forest Service 1989 estimates for harvests Assumes other

removals were 20 percent of harvests during the period 1983-86

d

 Assumes Forest Service 1990 estimates Assumes other removals were

20 percent of harvests during the period 1983-86

30

--------------------------------------- ---------------------

Removals Lowb Mediumc Highd
Table 11—Estimated timber harvests from Sealaska and

village corporation lands through 1989

Harvests

Calendar Sealaska Village

year Corporation corporationsa Totalb

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

16 d

45 f

55 f

25 f

22 h

50 i

56 i

101i

110k

80k

19

55

77

155

207

180

214

243

234

298

533

19c

70e

122g

209g

232g

202g

2Q39

299g

411 j

408 j.

613 j

Total 60l 2,243 2.848

a

 Calculated by subtracting estimated Sealaska harvests from estimated total

harvests.

6

 Figure for each year is best available estimate of calendar year harvests

c

 Source: Rogers, George W. 1985. The southeast Alaska regional economy

and communities: evolution and structure Prepared for U S. Department of

Agriculture, Forest Service, Region 10, Juneau, AK. Anchorage Institute of

Social and Economic Research. University of Alaska, Anchorage. November

83 p. On file with: Institute of Social and Economic Research, University of

Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508 USDA

Forest Service, Region 10 is cited as the original source.

d

 Source- Sealaska Corporation 1980- 8. Assumes that 1/2 of reported

Sealaska Timber Corporation harvest was from Sealaska Corporation lands.

e

 Source: Mehrkens 1983: 5 f

Source: Sealaska Corporation 1984: 9.

9

 Source: Mehrkens and Miller 1987: 5 h

 Source: Sealaska Corporation 1986: 37. Figure is for year beginning April 1

i

 Source: Sealaska Corporation 1987:36. Figure is for year beginning April 1.

j

Source: USDA Forest Service 1990: 10. Figures are for fiscal year ending September 30.

k

 Source: Sealaska Corporation 1990- 24. Figure is for year beginning April 1 /

 Source' Sealaska Corporation 1990: 24. Figure is for total harvests from

Sealaska ANCSA lands through March 31, 1990 This is 45 MMBF higher

than the total of harvests reported in the table (560 MMBF).

31
There are, nevertheless, important similarities in the experience of many of the village

corporations. Most received conveyance to their lands in 1979. As new corporations,

none of the southeast Alaska Native corporations had experience in managing or harvesting timber. Most village corporations entered into agreements with other companies to inventory, manage, and harvest their timber for them. These companies initially included Sealaska Timber Corporation, Koncor Forest Products Company, and

ITT Rayonier. Inc. Later some village corporations entered into timber harvest and

management agreements with other corporations or managed their timber operations

themselves.29

The primary if not overwhelming factor in the timber harvest strategies of most village corporations was a need for cash. After years of waiting for conveyance to

timber lands, many village corporations faced severe cash flow problems because

of factors such as litigation fees, unprofitable investments, and shareholder demand

for dividends.

Cape Fox Corporation began to harvest timber in 1979 and other village corporations

began harvesting in 1980. These initial harvests were relatively small but most were

profitable. Timber prices were high, and many Native corporations saw timber harvests as an opportunity to transform valuable but unproductive timber assets into

cash. Several corporations made substantial timber harvesting investments and

borrowed money by using their timber as collateral. As a result, when timber prices

declined sharply after 1980, many corporations had to continue harvesting or even

increase harvests to meet debt payments. This supply response was described in

several August 1985 articles in the Anchorage Daily News (Bemton 1985a, 1985b,

1985C):

"We thought we were at the top of a mountain," says Byron Mallott, president of

Sealaska, recalling the optimism of five years ago. "In fact, we were at the edge of a

cliff and we all walked off together." The value of export quality togs has dropped to

less than half its 1980 level. Lower grade pulp logs, which often make up more than

half the yield from an acre of forest, are not worth hauling off the hillsides. Several

corporations have simply left pulp logs to rot on the ground.

29 Sealaska Timber Corporation (STC) was formed ear

ly in

1980 to develop and market the forest resources of Sealaska

and other Native corporations. By 1981, seven village corporations, including Goldbelt, Shaan-Seet, Klawock-Heenya,

Huna Totem, Klukwan, Haida, and Kake Tribal Corporations,

had assigned to STC timber totaling more than 620 MMBF

Kavilco and later Kake sold timber harvest rights to ITT

Rayonier, Inc. Yak-Tat-Kwaan entered into a management

agreement with Koncor Forest Products Company, and

Shee-Atika recently sold all its remaining timber to a joint

venture with Koncor. Koncor, which is owned by several

south-central Alaska Native corporations, was described in

1983 as "an organization which collectively manages commercial forest lands for participating landowners. Basically

the Koncor program is a partnership venture where timber

harvesting rights are given in return for revenues derived

from the harvest of all lands managed in the program. This

purportedly provides a more even flow of revenues to all

participants" (Mehrkens 1985: 3) Goldbelt, Cape Fox, and

Kootznoowoo have sold most of their remaining timber to

Klukwan, Inc. or ITT Rayonier.

32
Despite the poor market, logging will continue. Many of the corporations are deeply

in debt and can't afford to stop. Since 1980, six village corporations have borrowed

more than $30 million to help finance roads, ports, heavy equipment and crew

payrolls, according to corporate annual reports....Two banks now hold more than

60,000 acres of Native lands as collateral for loans....

Back in 1980, it was thought that timber investments would begin to pay off in a few

years, providing the cash for dividends promised to shareholders. Now the loans are

coming due. For many of the corporations, the only way to pay the bills is to log....

Adding to the difficulties caused by declining timber markets were overly optimistic

expectations about merchantable timber inventory. For many corporations, initial

long-term planning and financial commitments for timber harvests were based on

inaccurate inventory assessments.30

Net operating loss sales—The substantial timber harvesting losses from 1981 to

1985 ironically became the basis for significant revenues to several village corporations in subsequent years through the sale of net operating losses. As a result of

a provision of the 1986 Tax Reform Act, Alaska Native corporations were permitted

to sell net operating losses (NOLs) until 1991. Each dollar of loss purchased by a

profitable corporation could be used to reduce its taxes by 34 to 46 cents. Up to

80 percent of the tax savings were returned to the Native corporations in payment

for the NOLs (Bernton 1987b). In effect, every dollar of loss could be worth between

24 and 36 cents to a Native corporation.

In 1986 and 1987, four southeast Alaska Native corporations together reported

more than $600 million in losses from logging operations and stumpage sales

(Bernton 1987b). These included both "hard" losses on logging operations and

"soft" losses or timber depletion losses due to decline in timber values from the

time of conveyance.31

 Many of the corporations undertook new appraisals, which

concluded that timber values at conveyance had been significantly undervalued in

the original appraisals, thus increasing the magnitude of the soft losses.

As a result of the NOL sale provisions, southeast Alaska Native village corporations sold a substantial share of their stumpage, primarily to Sealaska Timber

Corporation, Koncor Forest Products Company, and Klukwan, Inc. These companies are now major owners of the remaining timber inventory on village lands

in southeast Alaska.

Although it is clear that NOL sales economically benefited Native timber owners,

it is less clear what effect they may have had on the rate of timber harvest. If NOL

sales had been limited to only hard losses on actual harvest operations, any effects

on the rate of harvest would likely have been small. Corporations would have had

little incentive to increase hard losses in return for only part of the value of the

losses through NOL sales.

30 Personal communication, March 23, 1989, Frank A

Seymour, Marketing Specialist, Division of Business

Development, Alaska Department of Commerce and

Economic Development, P 0 Box D, Juneau, AK 99811

31 The term "hard loss" was used coloquially in the industry

and the press to refer to losses incurred on logging operations, when costs exceeded the value of harvests The term

"soft loss" was used to refer to a decline in the appraised

value of standing timber

33
The opportunity to sell soft losses may have had a more significant effect on the rate

of timber harvests, especially in light of the anticipated end of NOL sale provisions by

Congress.32 Soft losses, based on the difference between timber prices at conveyance and timber prices at the time of sale, could be realized only by actually harvesting timber or by selling stumpage in a lump-sum sale without any retained interest or control over the timber. Corporations that did not sell their stumpage may

have accelerated timber harvests or harvested otherwise unprofitable timber to gain

a soft NOL. Corporations that made lump-sum purchases of stumpage may have

faced pressure to harvest to realize a return on their timber investments. Thus NOL

sale provisions may have led to some acceleration of harvesting above rates that

otherwise would have occurred in 1986 and 1987.

Acceleration of harvests due to NOL sale provisions would have been limited by

several factors. The incentives for accelerating harvest would have declined as timber prices rose to levels they held when the timber was conveyed and as Federal tax

rates declined. In addition, in the absence of NOL sales, some cash-starved corporations might have continued to respond to lower prices by increasing timber harvests,

as occurred in 1984 and 1985.

In any case, because of the opportunity to sell NOLs. the rapid harvests by many

village corporations eventually proved a profitable strategy. According to Robert

Loescher, Sealaska senior vice president for resources (Sealaska Shareholder 1988),

...some village corporations have exhausted their timber supply and are now being

criticized for doing so. If those corporations had not harvested their timber, they would

not have had the timber depletion losses that made up the vast majority of Net Operating Loss agreements. I believe that the decision to harvest their lands will turn out

to be one of the best business moves those corporations ever made.

Nonsustained yield—No village corporation has attempted to follow a sustained

yield approach in its timber harvesting. Most village corporations will have harvested

all their merchantable timber within 10 years from when they began harvests, about

one-eighth of the time needed to produce marketable volumes of timber on secondgrowth stands in southeast Alaska.

Not following a sustained yield timber harvest strategy should not be considered irresponsible management by Native corporations. There are good economic reasons

for village corporations, in particular, to harvest their timber much more rapidly. A

1978 report summarized the economic situation facing Native corporations in managing their timber as follows:33

32 The Technical and Miscellaneous Revenue Act of 1988,

Public Law 100-647. was signed November 10, 1988 This

act barred the sale of losses from transactions occurring after

December 31. 1988 (Whitney 1988)

33 Glass, Ronald J 1978 An assessment of the

demand-supply situation for southeast Alaska timber

Juneau, AK 54 p Working report prepared for USDA Forest

Service, Alaska Region On file with Institute of Social and

Economic Research, University of Alaska Anchorage, 3211

Providence Drive, Anchorage, AK 99508

34
The fact that the old growth forests of Southeast Alaska yield little or no growth

means that the landowners possess capital which is providing no returns, leaving

them in a position where it would be economically rational to liquidate their standing

timber as soon as possible and reinvest in more lucrative alternatives.... The long-run

stability that might be related to the sustained yield of timber products might also be

a factor reducing the rate of liquidation, but this possible stability would also be at an

apparent sacrifice to overall net returns.... Whether or not a suitable market for pulp

logs can be found may [also] have considerable bearing on the level of harvest from

privately owned timber lands.

Klukwan, Inc., expressed the rationale for a strategy of rapid harvest as follows

(Klukwan. Inc. 1984):

Timber prices have actually declined over the nearly four years that we have been

in operation. Since timber is an asset and all assets should be providing a decent

return to the shareholder, it is easy to see why we feel that our timber is not doing its

part. We have millions of dollars of timber on the stump and it is actually declining in

value with each passing year. Even at an alternative rate of 10 percent (which is

easily obtainable for an investment of this size), we are missing out on millions in

earnings as those dollars sit on the stump instead of in the bank. For this reason,

we are harvesting significant amounts from Long Island each year to turn our timber

asset into assets (primarily cash) which can meet both the immediate and long term

needs of our shareholders.

Sealaska's senior vice president for resources has stated (Sealaska Shareholder

1988:3) that:

...no Native corporation in southeast Alaska has enough acreage to manage on an

economical sustained yield basis. In southeast it takes 80 to 100 years for re-growth.

Sealaska would have to hold its annual harvest to below 2,500 acres, and village

corporations to less than 200 acres annually, in order to maintain a sustained yield

timber harvest practice.

Individual village corporations had to cut timber at a much faster rate than is possible

under sustained yield management to harvest enough volume to cover the high fixed

costs of timber harvesting.

Yet another factor contributing to rapid rates of harvest by village corporations was a

desire to create employment for shareholders. Providing jobs for shareholders is an

important goal of many of the corporations.

As a result of these factors and political considerations, an attempt was never made

to enforce the Section 22(k) provision of ANCSA, under which Native lands were to

be "managed under the principle of sustained yield..." for 12 years. Responsibility

Sealaska Corporation for interpreting or enforcing this provision never was assigned by ANCSA or in subHarvests sequent legislation.

Unlike some village and urban corporations, Sealaska was able to reduce its harvest

levels when timber prices declined. According to the Sealaska 1984 annual report

(Sealaska Corporation 1984: 8, 9):

...volumes logged were deliberately curtailed to avoid selling product into a

depressed market...The Forest Products Group operated on a scaled-down plan.

marketing enough product to meet customers' basic needs but restricting cutting

levels in expectation that there will be better price levels in future years.

35
The Sealaska 1985 annual report provided an overview of management's long-term

objectives (Sealaska Corporation 1985:11,12):

From the beginning, our land selection has been a careful process. Generally, our

lands are selected for their timber and mineral potential....Given our location, and the

lands available for Sealaska selection, we estimate that 80% of our commercial lands

will fall into the timber development category....Most of the timber developments will

most likely occur on Prince of Wales Island, where most of Sealaska's current land

conveyances are....Looking 20 to 50 years in the future...a future Sealaska Corporation might well be a holding company, managing investments made possible by

capital generated by timber production in earlier years on Native and federal lands

and from the sale of long-term timber production....Sealaska would certainly be

involved in reforestation of our timber lands (which have a regeneration cycle of 60 to

100 years) and planning for continuing future harvest.

A possible further deterrent to acceleration of timber harvests by Sealaska may have

been the Section 7(i) revenue sharing provisions of ANCSA, under which Sealaska is

required to distribute 70 percent of net timber revenues among Native regional corporations. Presumably this requirement reduces the incentive for Sealaska to harvest

large amounts of timber rapidly, as a significant share of the profits would not flow to

the stockholders. I was not able in this study to determine how significant this effect

may have been.34

Future Native It is not possible to predict future harvests from Native corporation lands precisely for

Timber Harvests several reasons. First, and most importantly, future harvests will depend on market

conditions. The volume of timber that can profitably be harvested from current inventories will vary depending on many factors, including prices, harvest costs, interest

rates, environmental regulations, tax laws, timber revenue sharing requirements, and

competition from other suppliers in southeast Alaska, British Columbia, and the Pacific Northwest.35 Corporate objectives for managing the timber resource also may

change, depending on the relative priority placed on short-term cash needs, long-term

sustainability of harvest operations, and environmental objectives for corporate lands.

Because of these factors, even Native corporation timber managers may not be able

to predict future timber harvests from their own lands for more than 1 or 2 years in

the future. If prices fall, planned timber harvests may be reduced or canceled; if

prices rise, additional harvest areas may be added.

34 Sealaska has been involved in a long-standing legal

dispute with other regional corporations over the valuation

of timber in determining 7(i) revenue-sharing obligations for

timber harvests from 1982 to 1985 In January 1989, a

Federal judge upheld an arbitrator's ruling requiring Sealaska

to pay more that $14 million to the other corporations The

potential significance of the 7(i) provision for Sealaska harvests was illustrated by Sealaska's subsequent announcement that it would not harvest timber in 1989 unless a more

favorable timber valuation formula could be negotiated

(Anchorage Times 1989, Bernton 1989, Pilkington 1989).

35According to the Sealaska 1984 annual report (Sealaska

Corporation 1984), contributing to the difficulties in estimating

timber resource values were "uncertainties relating to federal

regulations governing harvesting techniques and export

marketing limitations."

36
An additional source of uncertainty is the extent of future land conveyances to Native

corporations, in particular Sealaska Corporation. As noted earlier, Sealaska is entitled to additional lands equivalent to between 12 and 43 percent of its current land

holdings. The actual extent of these conveyances will have a significant effect on

potential future harvests by Sealaska.

I used two different approaches to examine potential future harvests from Native

lands. First. I developed low, medium, and high estimates of current economic inventory by subtracting estimates of harvests and other removals from estimates of

original economic inventory conveyed to Native corporations. Second, I summarized

available information about remaining inventory and harvest plans for each of the

13 corporations.

Table 12 and figure 5 show three different estimates of remaining economic inventory

on Native lands. These estimates were calculated by subtracting estimates of harvests and other removals from estimates of original economic inventory conveyed

to Native corporations. The low estimate is based on a low assumption for inventory

conveyed and a high assumption for timber removals; the high estimate is based

on a high assumption for inventory conveyed and a low assumption for removals.

These estimates suggest a range that current Native inventory is likely to lie within.

As of 1990, Sealaska's remaining economic inventory is likely to be between 1.4

and 2.4 billion board feet. The remaining economic inventory on village corporation

lands is likely to be between 200 million and 1.7 billion board feet.

These estimates suggest that Sealaska could harvest timber at an annual level of

100 million board feet for 14 to 24 years. Harvests from village lands could occur at

an annual level of 250 million board feet for 1 to 7 years. Depending on the actual

harvest levels, these harvest periods could be shorter or longer.

These estimates of current economic inventory represent broad ranges, but with

available data, it is not possible to develop more precise estimates by subtracting

removals from inventory conveyed. Given the margin of error associated with

available estimates of economic inventory conveyed, it is possible (although less

likely) that remaining inventory could be lower or higher than suggested by these

ranges.

Industry sources and public officials are broadly familiar with past and present harvest activities on Native lands, inventory conditions, and harvest plans for 1 or 2

years in the future. Some Native corporations also have made statements about their

remaining timber inventories and harvest plans. These statements provide another

basis for projecting future harvests.

37

Remaining Timber

Inventory on

Native Lands

Projections of Timber

Harvests From Native

Lands
Table 12— Low, medium, and high estimates of original and remaining economic Inventory on southeast

Alaska Native corporation lands

Estimate

Low estimate

Ownership

Sealaska Corporation

Village corporations

Assumptions

Original

economic

inventory

conveyeda

2154

2770

Harvests

through

1989b

654

2423

Other

 removals

from

inventoryb

MMBF

52

195

Remaining

economic

inventory

as of

1990

1448

152

Years

remaining

at current

annual

harvestc

Years

14

1

Total 4924 3077 247 1600

Medium estimate Sealaska Corporation 2580 616 48 1916 19

Village corporations 3317 2286 176 855 3

Total 5897 2902 224 2771

High estimate Sealaska Corporation 3005 574 21 2411 24

Village corporations 3865 2127 77 1660 7

Total 6870 2701 98 4071

a

 The medium estimate for total volume was calculated by multiplying the estimated net timber volume of 10,941 MMBF (Scribner), given in

table 4, by a scaled harvest volume adjustment factor of 0.77 and an economic operability factor of 0 70 Sealaska's share of this timber volume was assumed to be 43 75 percent based on Sealaska's share of economically operable volume estimated in table 6 Low- and highestimate inventory assumptions were calculated by subtracting and adding a volume equivalent to the standard error of 16.5 percent to the

medium estimate b

 Based on removals estimates in table 10 Low-estimate figure utilizes high-removals figure from table 10, high-estimate figure uses lowremovals figure from table 10 For each estimate, Sealaska's share in harvests and other removals was assumed to be 21 2 percent, based

on Sealaska's share in total harvests reported in table 11. c

 Assumes current annual harvest level of 100 MMBF for Sealaska and 250 MMBF for village corporations >

Initial projections of timber harvests from Native lands were limited to estimates of

sustainable yield harvest levels. A 1978 report gives a figure of 150 million board feet

per year as the maximum potential sustained yield from Native lands:36

In Southeast Alaska alone, private landowners can harvest an estimated 150 million

board feet per year on a sustained yield basis. If these timber lands are similar to

those that have been harvested in recent years on the National Forest they will yield

114 million board feet of quality logs suitable for export and 36 million board feet of

pulp logs....An accelerated harvest from private lands of 225 million board feet per

year is apt to have a somewhat greater effect on the Southeast Alaska timber

industry.

36 Glass, Ronald J 1978. An assessment of the demandsupply situation for southeast Alaska timber. Juneau, AK

54 p Working report prepared for USDA Forest Service.

Alaska Region On file with. Institute of Social and Economic

Research, University of Alaska Anchorage. 3211 Providence

Drive, Anchorage, AK 99508. The figure of 150 MMBF was

cited as being based on information provided by Sealaska

Corporation

38
Figure 5—Low. medium, and high estimates of

original and remaining economic inventory on

southeast Alaska Native corporation lands. The

height of the bar represents the estimated

original inventory.

39
For several years, Forest Service reports repeated the estimate of a sustained yield

harvest level of 150 MMBF. As total Native harvests began to exceed this level, the

Forest Service and other observers began to predict an eventual decline in Native

harvests. A 1982 Forest Service report (USDA Forest Service 1982: 87) states:

The planned accelerated harvests from private lands will eventually lead to a downfall period until second-growth stands reach commercial maturity at 60-80 years.

A 1983 Forest Service report (Mehrkens 1983: 21) states:

Current harvest trends and anticipated improving markets indicate that the harvesting

of existing old-growth stands could be completed as early as 25 to 30 years with

reentry into second growth stands in 60-70 years.

A 1986 Forest Service report (USDA Forest Service 1986b: 16) states:

Native corporation timber harvests over the next decade are expected to be

between 225 and 350 MMBF annually, assuming current timber management

practices continue.

A 1988 Forest Service report (USDA Forest Service 1988a: 2) states:

Based on timber as yet unharvested, private lands are capable of harvest levels in a

range up to 350 MMBF per year until the mid to late 1990s. Actual harvest, however,

will depend on a number of factors including market demand; corporate marketing

strategies and finances; and previous harvest and remaining volume on timberlands

of each corporation. Once the finite high quality stands of old growth are harvested,

the remaining timber becomes less valuable. Low volume stands will be more

expensive to harvest and more difficult to market.

In 1986, an Alaska economic newsletter (Bradner and Bradner 1986) stated:

Southeast Alaska's raw log exports may drop by 40% over the next five years as

quality stands of timber on village corporation lands are depleted, industry observers

say. Sealaska Corporation, the regional corporation, should be able to sustain for

some time its current rate of about 75 million board feet/year of round logs cut for

export on its own lands, but overall, volumes of logging will fall off.

In 1987, the same newsletter (Bradner and Bradner 1987a) stated:

Log exports from Native lands in Southeast are expected to drop off sharply over

the next 2-3 years to around 100 million board feet yearly, state officials say.

In December 1987, the Alaska Department of Commerce and Economic Development conducted an informal telephone survey of Native corporation stumpage owners'

projected future harvests. The survey results, shown in table 13, projected that total

saw-log exports from private lands in southeast Alaska would decline from more than

300 million board feet in the late 1980s to only about half this level by the mid-1990s.

Sealaska's projected harvests would remain roughly constant at about 100 MMBF

per year, but Sealaska would become the dominant supplier as harvests ended on

most other Native lands.37

37 Forest Products Desk, Division of Business Development,

Department of Commerce and Economic Development, State

of Alaska. 1987 Alaska export quality sawlog supply information

Unpublished table. [December] On file with Institute of Social and

Economic Research, University of Alaska Anchorage, 3211 Providence

Drive, Anchorage, AK 99508. Not all Native corporations participated

in this survey and several have criticized it, although it is unclear whether

these corporations consider the results to be overly optimistic or pessimistic

40
Table 13—Alaska Department of Commerce projections for saw-log exports from southeast Alaskaa

Year

Supplier 1986 1987 1988 1989 1995

MMBF

Sealaska Timber Corporation:

Sealaska lands 125 100 100 100 100

Other lands 100 100 80 70 0

Klukwan and Associates 60 90 100 90 0

Koncor and Associates 30 30 40 40 30

Other public and private 15 20 15 20 20

saw-log suppliers

Total 330 340 335 320 150

a

 Future supply figures are based on assumptions of normal markets but do not allow for special distressed or damaged timber sales from public land. Pulp log factor is 25 to 30 percent of export saw-log

volume. Estimated species mix is 65 percent hemlock, 25 percent Sitka spruce, and 10 percent cedar.

Source: Forest Products Desk, Division of Business Development, Department of Commerce and

Economic Development, State of Alaska. 1987. Alaska export quality sawlog supply information

Unpublished table. [December]. On file with: Institute of Social and Economic Research, University of

Alaska Anchorage, 3211 Providence Drive, Anchorage, AK 99508.

According to a 1988 Alaska Department of Labor review (Rae 1988: 9), "most

[industry observers] agree that marketable timber from Native lands will be harvested by the middle 1990s."

According to the former Ketchikan Area Forester of the Division of Forestry, Alaska

Department of Natural Resources, many of the village corporations will be done with

significant logging by 1991. In contrast, Sealaska, with a much larger timber base,

will be able to continue harvesting for a much longer timber period.35

The president of Koncor Forest Products Company, owner of stumpage on several

village corporation lands in southeast Alaska, was described as expecting a "drastic

reduction in timber harvesting on Native lands in Southeast Alaska by 1990" (Tyson

1988).

38 Personal communication, May 27, 1988, Bill Hanson.

Ketchikan Area Forester, Division of Forestry. Alaska

Department of Natural Resources, P.O Box 3361, Ketchikan.

AK 99901

41

---------------------------------------- -------------------------------------
42

Projected future timber harvests by seven village corporations for which information

is publicly available are summarized below.

Corporation Summary of outlook for future timber harvests

Goldbelt, Inc. Most remaining stumpage owned by Klukwan or

ITT-Rayonier. Harvests expected to end by 1991

(Goldbelt 1987: v, 1989:10,11).

Huna Totem Corp. Timber harvests completed in 1987 (Huna Totem

Corporation 1988:10).

Kake Tribal Corp. Most remaining stumpage owned by Sealaska Timber

Corporation. Harvests likely to be completed by end of

1991 (Kake Tribal Corporation 1989:24).

Klawock-Heenya Corp. "Approximately 220 million board feet remaining at the

beginning of 1989 which may or may not be economical

to harvest depending upon the market" (Klawock Heenya

Corporation 1988: 2). "About four years of prime timber

harvesting left or about five years of harvesting second

grade timber" (Sealaska Shareholder 1989C: 3).

Klukwan, Inc. All remaining timber to be harvested by 1991 (Sealaska

Shareholder 1989b: 3; Stevens 1987:3).

Kootznoowoo, Inc. Harvesting on currently owned lands likely to end by

1992. Negotiating with USDA Forest Service for a land

exchange, which, if successful, could "substantially

extend timber supply" (Kootznoowoo, Inc. 1990:4).

Shaan Seet, Inc. About 3 years of timber harvesting (60 MMBF)

remaining as of May 1989 (Sealaska Shareholder

1989a).

According to discussions with industry observers, timber harvests are nearly completed on lands of most of the other five corporations. Harvests are likely to continue

beyond 1995 on lands of only one of these corporations.

In 1988, Sealaska's senior vice president for resource management stated (Alaska

Loggers Association 1988:3):

Almost half of the 12 village corporations have exhausted their timber supply. The

other six will exhaust their supply in two or three years. Shee-Atika Corp. has about

a 10-year supply. Sealaska has about a 10- to 15-year supply.

He also stated (Sealaska Shareholder 1988):

Under current market conditions Sealaska has 10 to 12 years of harvesting left....If

the market turns down, then the amount of timber we can economically harvest will

shrink.

Sealaska has emphasized the uncertainty in projecting future harvests (Sealaska

Corporation 1987:36):

Estimates of the remaining volume and value of harvestable standing timber received under ANCSA may vary greatly based upon fluctuations in future log market

conditions, and for economic and cultural reasons, it is probable that not all of the

lands will be harvested.
Summary of Native

Timber Harvest

Projections

Literature Cited

There is a general consensus among industry observers that Native timber harvests

on lands currently owned by village corporations will decline sharply in the 1990s

because of declining inventory. At least 9 of the 12 village corporations are likely to

have cut nearly all their economically operable timber by 1991 and will have very

little future sale volumes from lands that they currently own. Harvests may continue

on lands of two other village corporations until 1994. Only one village corporation is

likely to be able to sustain harvests at current levels for more than 5 years into the

future. Thus a sharp and continuing decline in harvests from current village corporation lands will occur by 1992. Future land trades could provide additional timber

volume to two or three village corporations, however, and thus somewhat slow the

decline in harvests from village corporation lands.

Sealaska Corporation, in contrast, still has substantial volumes of timber and has

stated that harvests can continue at current levels for 10-12 years if current market

conditions continue. If timber prices decline, it is likely that Sealaska harvests will be

lower, but they might be spread out over a longer period.

A best-guess projection of future harvests if current market conditions continue is that

Native harvests will decline sharply, to 150 to 250 million board feet per year, by

1992 as most village corporation harvests end. Harvests then will gradually decline

further to 100 to 150 million board feet per year until the late 1990s. After the 1990s,

as Sealaska's remaining volume is harvested, harvests will decline to a lower level

measured in the tens of millions of board feet.

Market conditions will play an important role in determining future harvest patterns. If

prices continue at high levels, short-term harvests from Sealaska and village lands

will be higher, and the eventual decline in harvests will occur sooner. Alternatively,

if market conditions decline, harvests will drop more sharply in the short term but

may continue at a lower level for a longer period.

Projections by industry observers of the outlook for Native timber harvests are

consistent with the low or medium estimates of remaining economic inventory on

Native lands presented in table 12, which suggest that village corporations could

harvest timber at an annual level of 250 million board feet for 1 to 3 years, and

Sealaska could harvest timber at an annual level of 100 million board feet for 14 to

19 years. These suggest that original conveyances of economic inventory, harvests

to date, and other removals from inventory may have been similar to the assumptions used in developing the low or medium estimates. This would imply that original

economic inventory was between 4.9 and 5.9 billion board feet and total harvests to

date have been about 2.4 billion board feet.

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*U.S. GOVERNMENT PRINTING OFFICE: 1992 • 691-000/60024

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